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Australian trucking companies are reaching a critical juncture, with a concerning trend of one out of every 12 businesses shutting down in recent months, as highlighted in a recent report.
This alarming situation is primarily driven by a trifecta of challenges: escalating fuel and labor expenses, persistently high interest rates, and intense market competition. The report, conducted by CreditorWatch, paints a concerning picture for many freight operators striving to stay afloat financially.
Smaller, family-operated carriers, which play a vital role in supporting essential industries through regional and interstate routes, find themselves particularly at risk. Unlike their larger counterparts, these businesses often don’t possess the financial reserves or bargaining power necessary to weather such economic storms.
Adding to these hurdles, the trucking industry is grappling with a significant shortage of drivers. This scarcity is driving up labor costs, as the lack of younger individuals entering the field results in a workforce that is steadily aging.
A shortage of drivers is pushing up labour costs as a lack of younger drivers taking up the job leaves companies with an ageing workforce.
The price of second-hand trucks, which jumped during the pandemic, has now fallen dramatically by more than 60 per cent.
Added to these are volatile fuel prices, higher insurance premiums and rentals and the demands of environmental compliance.
CreditorWatch data shows the closure rate for road transport businesses during the past 12 months was 8.46 per cent, or one in 12 businesses.
This was an increase of 40 per cent year-on-year and a 26 per cent rise since this January.
The closure rate for transport companies has rocketed and now rivals that of the hospitality sector, traditionally one of Australia’s most failure-prone industries.
There are some bright prospects for trucking firms, particularly in the mining and commodities sectors.
But the benefits are unlikely to compensate for the industry’s current dire condition, according to CreditorWatch chief economist Ivan Colhoun.
“Elevated cost bases, stretched balance sheets, and soft freight demand from retail and manufacturing mean insolvency pressures are set to remain high through 2026,” he said.